Talent Management Industry User Research Report
Published by Rachel Wille, December 19, 2016
HR software is one of the most widely-used and crowded software markets. The industry has grown to around $14 billion and is home to hundreds of software solutions, all promising to be the holy grail that resolves all of your recruiting, talent, performance, and benefits needs.
People are the most important asset to any business, so it follows that talent management software is such an active space. While HR software has been around for decades, talent management is a relative newcomer in the HR tech world, responding to businesses’ need to better strategize hiring and retention of employees at a company level.
But we wanted to know more about the buyers of this software. So we surveyed 500 HR professionals to find how they purchased their talent system, how they use it, what they wish they could get out of it, and what results they’ve seen from this investment.
We’ve analyzed our results below, and found that the talent software space is home to some pretty savvy buyers, and in line for some big changes in the coming years.
- Talent software is being adopted by small/medium businesses, with 66% of buyers earning less than $50M in revenue.
- 68% of talent software buyers spend less than 6 months researching their purchase.
- Talent management software buyers who do multiple demos are 20% more satisfied on average than those who do zero demos.
- Respondents spent on average $26,000 per year on talent management software.
- Talent software has the biggest impact on hiring, with 66% reporting a significant improvement in their process. 46% said cost of training improved, and 43% said employee retention increased.
Read on to see the details of our research, and much more information about how software buyers find and use talent management software.
Who uses talent software?
We looked at company size, industry, and other demographics to get a better sense of who these buyers are. And we found that talent management buyers had some unique characteristics.
Top Industries that Use Talent Software
In our survey, users of a talent management solution were primarily in the education (14%) and medical (16%) fields. What do these industries have in common that would make them big users of HR software?
First, both these industries in the U.S. are subject to a large number of federal and state-level regulations. Employees in these industries are required to have specific certifications that need to be tracked and renewed on a regular basis. Additionally, education employees have the 2nd highest rate of union membership in the country (35.5%). This unionization means that teachers can lobby for more benefits than other professions, and it means that hiring, firing, and tenure decisions have an extra layer of complexity. Storing, tracking, and managing this complicated employee information would be challenging without software.
The industries least likely to use talent management software are event planning (0.4%), religious organizations (0.4%), and, strangely, legal (1%). Although it seems like law practices would be more likely to use HR software to prevent audits and internal lawsuits, it may be that firms opt to manage their employees via a dedicated law practice management solution rather than a standalone talent system.
Were you using a different talent system before purchasing your current software?
Most of our respondents (60%) were first-time buyers of talent management software. Bersin by Deloitte has been reporting for years that the talent management software industry is changing, growing, and moving away from an oligopoly with just a few players. Smaller vendors are moving in on the industry giantsSmaller #talentmanagement vendors are moving in on the industry giantsTweet This, and making software more accessible to small and medium sized businesses.
This seems to add up in our data. First-time buyers, on average, had about half the number of employees as repeat software buyers (185 employees vs. 396 employees).
What is your organization’s annual revenue?
66% of orgs using #talentmanagement software today are SMBs.Tweet ThisThe average size of companies buying talent software in terms of revenue are also skewed toward small businesses. 66% of our survey respondents worked for organizations making less than $50 million a year.
Which talent management system do you currently use?
This industry shift is also reflected in the brand choice of our survey respondents. Oracle’s Taleo is the second most frequently used solution at 11% (which falls in line with our Top 20 Most Popular Talent Management Software ranking), but these companies tend to be larger corporations, averaging over 6,000 employees. By comparison, with the exception of HRSoft, users of all other solutions featured in this chart averaged between 80 and 600 employees.
Is your software web-based or on-premise?
The majority (67%) of HR professionals in our survey opted for a web-based SaaS solution67% of #HR professional opted for web-based #talentmanagementTweet This. This is a relatively recent switch in the talent software world, and the B2B software world at large, but it’s quickly overtaking the market. HR experts believe that use of SaaS solutions will double in the next two years.
Though some have concerns that web-based solutions present a security risk, others suggest that cyber security with SaaS tools is actually an improvement to current practices. In general, it seems like HR professionals are open-minded and willing to put their faith in cloud-based systems.
How long have you been using your current talent software?
Most (almost 89%) users have had the same talent management system between one and five years. Perhaps there is a lot of brand loyalty in this industry, or more likely, companies would rather stick to the same software for years at a time rather than constantly transfer employee data from platform to platform and incur other high switching costs. Many software providers also offer multi-year contracts, which would prevent users from switching programs too frequently.
How do buyers search for talent software?
The search process can be one of the most difficult steps in a software purchase. There are so many options and so much information for buyers, it can be hard to know where to start. We wanted to learn how much time people devoted to the hunt, and what resources they took advantage of to learn about their options.
Talent Software Search Time: Expected vs. Actual
Talent management systems are a significant purchase for most companies, especially first-time buyers. In terms of money and effort, implementing a talent system can be an investment, so it’s surprising that more than half of our respondents (68%) spent less than six months searching for their solution.
Though most of these buyers accurately estimated the time it would take to select a solution (61%), 20% actually spent less time than they anticipated exploring the market before finalizing their purchase. If you’re overwhelmed by the prospect of a long search for talent software, you can take heed in this - it will probably take you less time than you think, so there’s no reason to put it off!
How many demos did you complete before purchasing your software?
Talent software users were likely to perform a number of demos before completing their purchase. 79% did at least two demos before selecting a software, and 33% completed three or more.
This falls in line with most of our other research in categories of a similar size and saturation; for example, CRM buyers had a comparable breakdown of demo completion. However, where a full quarter of CRM buyers either demoed zero solutions or bought the first solution they tried out, Talent buyers did slightly more research, with only 21% demoing 1 solution or fewer.
The best thing you can do for yourself when considering a talent management software purchase is to come up with a plan before you start your search. Take time to assess your current process, and be specific about what you expect from your solution. Then, do your homework. Talent management is one of the most saturated tech industries. There are a lot of options out there, so performing multiple demos will help you fully understand your options and pick the best fit for your company’s needs. It seems like our survey respondents are doing just that, which is saving them time in their overall search process.
Talent Software Cost: Expected vs. Actual
While a plurality (34%) of respondents spent between $1,000 to $10,000 a year on their talent management solution34% spend between $1k to $10k/year on their #talentmanagement solutionTweet This, the average spend actually skewed slightly higher, at $26,000 per year, due to some outliers (likely larger organizations) spending over $100,000 annually. About half (53%) of our respondents accurately budgeted for their solution, the remaining spending slightly less or slightly more than they expected.
Talent Software Cost: Per Additional End User
Most talent systems are priced based on the total number of users. Although overall costs will increase as your organization grows, the cost per employee decreases as you become eligible for enterprise rates/systems.
Interestingly, there was no difference in price between web-based and installed solutions. In most other industries, storing your software and data in the cloud saves your company money. Installed solutions require you to own servers, which are costly to run and require constant monitoring and maintenance by your IT department. Since web solutions are not as DIY as installed systems, they require less initial start-up assistance from your tech team. Those cost savings are generally reflected in the overall price of the solution. So what makes talent software different?
Our best hypothesis is that although the industry is opening up to more small business solutions, the majority of cloud solutions are still enterprise giants who have transferred their installed solution onto a web platform. This platform change is too recent to reflect any noticeable price decreases.
Talent Software Cost by Buyer Generation
Although it is a slight difference, first-time talent management buyers tend to pay slightly less overall than repeat buyersFirst-time #talentmanagement tech buyers tend to pay slightly less overall than repeat buyersTweet This (about $22,000 vs. about $29,000 per year). Since many solutions price by number of end users, and our first time buyers tended to have fewer employees, this adds up.
First time buyers were also the only users who reported using a free or open-source solution (and even then, it was a meager 2% of first-time buyers). Overwhelmingly, 67% of these free solutions were accessed as an installed download, rather than a web-based solution. This supports the idea that cloud talent solutions are still a new concept in this market, but we predict their use will continue to grow over the next few years, and prices for cloud solutions will decrease.
Most Important Factor in Talent Software Purchase Decision
Prices for talent management systems may also be higher because people are willing to pay the price for a solution that works. Functionality is the most important factor contributing to a purchase decision, followed by how easy it is to use. Price trails in as the third most important priority.
How do HR teams use talent software?
Talent software can be pretty robust, so we wanted to find out which features were most important to buyers, and how long it took them to adopt their solution.
Talent Software Implementation Time: Expected vs. Actual
In general, people accurately estimated their implementation time (54%), with 21% saying it took longer than they expected, and 23% saying the implementation process was shorter. Those who overestimated implementation time were off by about eight months, and those who underestimated were off by about seven. In general, this is a good lesson for new buyers. However long you think it might take to fully implement your software, keep in mind that you may need to give or take six months or more.Give yourself a 6 month buffer when planning your #talentmanagement software implementationTweet This
Talent Software Implementation Time by Buyer Generation
Though most companies were able to implement their software in under a year, this time does, counterintuitively, increase for second generation buyers, possibly because they are more likely to be large companies with more data to transfer. Larger companies would also need to go through multiple levels of approvals, with more individuals involved in the decision process, all of which would impact time.
Most Used Talent Management Features
According to other recent Capterra recruiting software research, 76% of HR professionals use software to aid their hiring process. While some of those recruiters may rely on a distinct applicant tracking solution, recruiting is still the #1 most-used feature in talent management tools. The other top features focus on employee performance and professional development. HR departments used their software to collect anonymous employee peer feedback (42%), track individual skill development (44%), track individual goals (46%), and assess all three of those performance aspects and more in the appraisal process (50%).#HR departments use their #talent software for #recruiting, performance appraisal, and skill trackingTweet This
An important distinction to make here is that most of these features focus on the employee performance aspect of HR, rather than the more administrative features like payroll and benefits. Talent software is people software, focusing on careers and development. General HR software is better suited to handle issues of money and time, and talent software is for those dedicated to their human capital.
Most Desired Talent Management Features
The ability to access their talent suite via a mobile app was the feature users most wished they had. Other desired features focus on the recruiting and training/onboarding process. For recruiting, buyers most wish they could integrate with social media to help find and contact the best-qualified candidates and perform video interviews and trainings. Personality and aptitude tests help HR departments match internal and external candidates with the best-suited position. Finally, gamified performance reviews and training can help employee engagement.
While these features may still fall under the “nice to have” section for many buyers, they will only continue to grow in importance as millennials enter the workforce and technology adoption continues to skyrocket. For now, these features will make some solutions stand out. Solutions that have these perks may use them as a selling point now, and those that don’t may need to add them in order to keep up.
What is the ROI of talent management software?
With all this investment of time and money, is implementing a talent system worth it?
How satisfied are you with your talent management software?
An overwhelming 74% of users are satisfied or very satisfied with their talent management purchase.A whopping 74% of users are satisfied or very satisfied with their #talentmanagement purchaseTweet This Those who were not satisfied cited a lack of features being the primary reason for their discontent.
There are two major characteristics of those who were highly satisfied. First of all, these people did more demos. Satisfaction rates increased 20% from those who did zero demos compared to those who did two demos, and stayed consistent with those who did three demos or more. A full third (36%) of people who neglected demos entirely reported being indifferent about their selection. Those who did zero demos were the most likely to report a high rate of dissatisfaction.
Talent Management Satisfaction by Length of Software Ownership
Secondly, satisfied buyers tended to have owned their software for longer. The rate of users who reported being “very satisfied” with their software increased steadily the longer they had been using the system. One third (33%) of respondents who had their system for ten years or more were “very satisfied.” However, it is important to note that there was an increase on the other extreme as well: those who had their software for over ten years were almost three times more likely to report being “very dissatisfied” compared to those who had their software for fewer than ten years, and also more likely to feel neutral about their software.
This polarization is unsurprising. The talent management space was very different ten years ago. As software companies expand their talent management platforms to include more features and functionality, it makes sense that what was useful a decade ago is becoming obsolete today, and that those users would be more dissatisfied with their older tools.
That said, the “honeymoon” period for talent software appears to be quite lengthy. Overall satisfaction rates (satisfied and very satisfied combined) peaked at 85% for those who had their system between five and ten years.
While this suggests that talent software is meeting the needs of HR professionals, and most people are happy with their selection, those who have done more research prior to purchasing, and those who commit to their system for multiple years, end up being happier overall.
Which aspects of talent management were greatly impacted by software?
Two thirds (66%) of users reported their talent system had a significant impact on their hiring process.66% say their #Talentmanagement signficantly improved #hiringTweet This This continues to align with our previous recruiting research, where the majority believed strongly that software is irreplaceable when it comes to hiring.
That said, talent systems had less of an impact on the overall cost of training employees, the rate of employee retention, and employee morale. This is likely due to the features our surveyed users valued most. Appraisals, feedback, and career/professional development management all help employees stay invested in their jobs and the company as a whole. However, “flashier” features like gamification, video, and social media would have a greater impact on employee attitude, which is why these features are highly coveted. The absence of these features in most of the surveyed platforms makes it unsurprising that talent systems did not greatly impact employee morale and retention.
Capterra’s talent management research shows that the HR tech industry is a powerhouse of recruiting and performance functionality. Though these systems are expensive to own, they pay for themselves by making the jobs of HR professionals easier and more efficient. They allow more focus on the people behind a company’s “talent” umbrella, and ensure that the right people are employed in the right positions.
This industry is a progressive one, with smart professionals who are embracing the cloud, making educated software purchases, and realizing that size doesn’t matter — even small businesses have much to be gained by implementing a talent management system.
It would be interesting to follow up on this survey in the next year to see how the market has changed: whether the powerhouse systems like Oracle experience a comeback, or if our predictions are correct, and more and more smaller players will take their share of the market. We would also expect a visible shift in software deployment, with web-based solutions taking over.
It would also be valuable to see how this data compares to users of other solutions in an HR tech stack. We talked a bit about how talent users relate to users of ATS, but with performance appraisal being so closely intertwined with talent, it would be interesting to pinpoint the similarities and differences between the two: how users are taking advantage of both, what they find each system best suited for, and how much HR professionals are investing in their software in general.
This data was collected by Capterra through an online, 23 question survey. 500 qualified HR professionals completed the online survey over a two week period via a third party independent research firm.
About the Author
Rachel Wille is the Senior Product Research Analyst at Capterra. She studied at Carnegie Mellon University and is using her Decision Science degree to communicate data and help people make the right software choice.